Heading Off to College? Time to Think About Banking Needs

August 15, 2014

Your Money

By ANN CARRNS

IF you’re a student heading off to college for the first time, you have a lot of options for handling your money these days. It makes sense to think about it before you arrive on campus and find yourself swept up in the back-to-school whirlwind.

Some campuses have agreements with banks or other financial service companies that let them pitch accounts to students. In some cases, schools may offer a student identification card that can double as a debit card, when an associated bank account is activated; the cards typically bear the school’s logo. Wells Fargo, for instance, offers such cards through agreements with roughly 30 campuses, said Stephen Nixon, head of the bank’s campus card program. Students can typically have monthly service fees waived if they activate the account.

Anna Breen, 21, a political science major heading into her senior year at the University of Minnesota Twin Cities, opened an account with TCF Bank, which has a marketing relationship with the university, when she first arrived on campus. She already had an account at a credit union, but it didn’t have any A.T.M.s on campus. She said that while she hasn’t had any problems with her TCF account, some students have been surprised by fees they were charged when they overdrew their accounts. She suggested the school could do more to make students aware of alternatives, so that freshmen in particular know TCF is not their only option.

Richard Pfutzenreuter, chief financial officer at the University of Minnesota, said students were given materials about TCF when they obtained their student identification cards, but signing up for an account wasn’t mandatory. “We’re extremely pleased with our relationship with TCF,” he said, adding that the school considers the account “superior” to other student options. He noted, however, that other banks were available on the Twin Cities campus; U.S. Bank has a branch there and, there are nine A.T.M.s not owned by TCF.

Other schools work with financial companies like Higher One to distribute federal financial aid “refunds” to students. (A “refund” is any money left over after the school deducts its charges for tuition and other costs. Students can use the remaining funds for supplies, rent and other living expenses.) Higher One promotes its debit cards and associated accounts as a fast, easy way for students to get their refunds.

Christine Lindstrom, higher education program director with U.S. PIRG, advises researching the details of any campus debit card you are offered, to make sure you’re aware of all fees. Terms on school-affiliated accounts may not be the best available to you, she said. The federal Department of Education is weighing whether to issue new rules governing student debit cards, to make sure students aren’t paying excessive fees to get their federal aid. “Our perspective is that students are a captive audience on the campus,” she said. “They should be getting a superior deal than they could get elsewhere.”

Alex Matjanec, co-founder of the website Mybanktracker, suggests that you consider your degree of independence when choosing a bank account. If your parents will be sending you money every month, you may want to choose an account at the same bank they use, to make fund transfers easier. But check to see whether it has branches near where you’ll be going to school — otherwise, you may eat up your allowance in out-of-network A.T.M. fees.

Online-only banks are an option if you don’t care about branch access, and even some big, national banks offer accounts that may be worth a look, he said. Citibank, for instance, offers a student account that carries no monthly fee and no fee for using non-Citibank A.T.M.s while you’re enrolled in college.

Terms on student accounts, however, typically expire after four to five years or upon graduation, so new fees may apply after you lose eligibility.

Odysseas Papadimitriou, chief executive of the financial site WalletHub, advises students to focus on an account’s actual terms, rather than whether it’s marketed specifically for students: “Don’t worry about whether the accounts has the word ‘student’ in the name.”

You may be able to find a credit union or community bank near your campus where you can bank cheaply, he said. WalletHub’s list of best accounts for students includes online banks that aren’t household names, like AmericaNet Rewards Checking, offered by the online division of Oklahoma-based All America Bank. The checking account features no monthly fee and lets you earn 1.5 percent on balances up to $10,000 if you meet certain requirements, like making at least 10 check card purchases a month. The account does, however, charge a $25 fee if you overdraw your account.

Here are some questions about campus bank accounts:

■ What should I look for when selecting a bank?

You’ll want to make sure you can get to your money easily and cheaply. Most banks have online A.T.M. and branch-finder tools, so you can search ahead of time to see if they have machines on or near your campus.

■ Are are there checking account options I should avoid?

Several experts advise students against opting in to overdraft protection for debit card purchases, a service that lets you overspend your account. The bank covers any shortfall temporarily, but usually charges a stiff fee for doing so, and the fees can add up quickly. Some banks may reorder transactions so that the largest transactions are paid first, which can maximize the number of overdrafts and, therefore, the amount of fees you’ll pay. If you don’t opt in, your transaction will be declined, but you won’t be out money for a fee.

■ If I receive a debit card from a bank or financial company affiliated with my school, do I have to use it?

No. Some schools may mail you the card automatically, though, and it may appear that activating the card is required, says Ms. Lindstrom. If you’re due a student aid refund, you can choose to have it deposited electronically into another account of your choice, she said, or you can ask for a paper check.